DOJ Moves to Finalize ABI-SABMiller Consent Order, Parties Seek Hearing

The Justice Department has petitioned the court to finalize the Proposed Final Judgment eight months after the DOJ responded to public comments filed under the Tunney Act.   In its motion the court seeks to make the terms of the consent order the DOJ negotiated with ABInbev and SABMiller/MolsonCoors final.  In this brief the DOJ claims to have responded to all concerns and they have complied with all terms of the Antitrust Procedures and Penalties Act (APPA).

However, this view of compliance is not shared by a growing collections of entities.  There are now five different entities including NBWA that have petitioned Judge Sullivan noting concerns with the process and substance of this order.  While the specific concerns vary, a generalized theme has emerged from four of the briefs about holes in the terms and language of the PFJ that will cause real life enforcement challenges due to the inconsistent treatment of the competitive concern identified.

The five entities that have filed briefs to date are Yuengling, Teamsters, Consumer Action and Consumer Watchdog , the National Beer Wholesalers Association, and the Brewers Association.  While the Teamster brief addresses the closure of the Eden, North Carolina brewery, the other briefs highlight inconsistencies and ambiguities in the PFJ.   Areas such as ABI ownership or partial ownership of distribution, changes in owners and management, and penalties by ABI against brewers that sell other craft and imported beer brands remain ambiguous.   These concerns of ambiguity were only exacerbated with the DOJ’s motion to finalize the PFJ.  In a footnote the DOJ explained that part of the delay in filing was a result of negotiations with ABI over what is permissible treatment by ABI of its independent distributors.    The standard apparently arrived at  for one part of Section V of the PFJ creates many more questions than answers.  It introduces many new undefined and subjective terms that will cause confusion moving forward.  It reads:

“Independent distributors are required to provide ‘best efforts’ to achieve and maintain the ‘highest practicable’ sales volume and retail placement of ABI beer. Consistent with this requirement, a distributor may ‘on occasion,’ and without violating best efforts to ABI, make ‘unsolicited recommendations’ to individual retailers, specific to each such individual retailer’s location(s), to convert a particular ABI ‘retail placement’ to that distributors third-party brewer’s beer when such recommendations are made for the express purpose of increasing such retailer’s sales of beer, including third-party brewers’ beer or ABI’s beer, so long as such unsolicited recommendation does not result in more than a ‘de minimis’ decrease in the sales volume or retail placement of ABI beer in the independent distributor’s assigned geographic area.” (Underlines added)

The ball is now in the court of Judge Sullivan.  The APPA is clear than an order must be clear and free from ambiguity.   At least four entities are saying it is not clear.  Judge Sullivan can grant the DOJ request to finalize, or he can hold a hearing or he can ask for more briefing on any of the issues raised.  We’ll wait and watch.

In the meantime, the Consent Order term is for ten years and is effective now.  A Monitoring Trustee has been appointed to be the contact for any concerns, questions or disputes about compliance with the PFJ.   Bill Berlin is the Monitoring Trustee and his contact can be found by clicking here.

(previous post) Justice Department Responds to Public Comment on ABI-SABMiller Merger

(January 13, 2017)  The Justice Department has responded to public comments filed by 12 parties (including NBWA) on the Justice Department’s Proposed Final Judgment (PFJ).  The PFJ and Consent Order was finalized between the Justice Department, SABMiller and ABInBev in July, 2016. In the response, the DOJ did not modify the PFJ and will soon move to ask Judge Sullivan to sign the final order for this case.

I previously summarized key provisions of the PFJ at this link. The 12 parties noted many varied areas where the PFJ was potentially confusing or did not go far enough. The DOJ had two forms of responses to these questions; 1) the PFJ already covers the question or 2) the request is outside the scope of the DOJ Complaint and Competitive Impact Statement. That being said, the confusion raised by the 12 parties and the deflection of answering several of these practical questions will significantly raise the importance of the Monitoring Trustee’s role in enforcing this PFJ.

To me the DOJ response under these Tunney Act proceedings was confirmation about the size of the wall they erected in the PFJ. The DOJ confirmed that the wall is indeed 30 feet, not 25 but they will not raise to 35 feet either as they feel their original settlement suffices to cover all concerns or that the other issues raised by the parties are outside their jurisdiction under the Complaint.

At this point, it is unknown if the Court will hold a hearing before entertaining a request to sign the final order.

(July 21, 2016 Update)

The required notice under the Tunney Act for comment on the proposed consent order has been published in the Federal Register.  The Justice Department will receive comments for 60 days.  The notice can be found here.

(earlier)    Justice Department Clears ABInBev Purchase of SABMiller With Conditions

The Department of Justice announced that it has approved the ABInBev purchase of SABMiller in the United States. The DOJ’s press release, Proposed Consent Order, and Competitive Impact Statement can be found here.

The DOJ approved the proposal by ABInBev to sell the SABMiller interest in the MillerCoors Joint Venture to Molson Coors and also added several additional conditions to ensure independence in the beer distribution industry. These provisions include restrictions on ABI, such as:

  • Acquiring a distributor if the acquisition would cause more than 10% of ABI’ s beer in the United States to be sold through ABI-owned distributors;
  • Prohibiting or impeding a distributor that sells ABI’ s beer from using its best efforts to sell, market, advertise, promote, or secure retail placement for rivals’ beers, including the beers of high-end brewers;
  • Providing incentives or rewards to a distributor who sells ABI’ s beer based on the
    percentage of ABI beer the distributor sells as compared to the distributor’s sales of the beers of ABI’s rivals;
  • Conditioning any agreement or program with a distributor that sells ABI’ s beer on the fact that it sells ABI’s rivals’ beer outside of the geographic area in which it sells ABI’s beer;
  • Exercising its rights over distributor management and ownership based on a
    distributor’s sales of ABI’s rivals’ beers;
  • Requiring a distributor to report financial information associated with the sale of ABI’s rivals’ beers;
  • Requiring that a distributor who sells ABI’ s beer offer its sales force the same
    incentives for selling ABI’ s beer when the distributor promotes the beers of ABI’s rivals with sales incentives.

 

The Consent Order contains additional provisions to ensure that Molson Coors is a robust competitor to ABInBev in the United States including provisions to facilitate Molson Coors effort to compete with ABI and ensure independent production of the current Miller brands for the US marketplace.

I will seek to provide additional perspective in the coming days after a more thorough review.

News coverage of the announcement can be found here and here.

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